Canadian residents and other foreign visitors who winter in the U.S. are technically subject to U.S. income tax if they exceed a specific number of days (based on a calculation on the form 8840) in the U.S. in any one year.

To avoid U.S. taxation, IRS form 8840 (Closer Connection Exemption Statement for Aliens) needs to be filed annually with the U.S. Internal Revenue Service.

The form, in essence, acknowledges that you met or exceeded the "substantial presence test" BUT are not going to be filing a U.S. income tax return due to the fact that you maintain "a closer connection" to a foreign country, such as Canada, where you will be paying annual income tax.

You will be considered to have a "closer connection" with a country other than the U.S. based on the location of:

Your permanent home. Your family. Your personal belongings, such as cars, furniture, clothing, and jewellery. Your current social, political, cultural, or religious affiliations. Your business activities (other than those that constitute your tax home). The jurisdiction in which you hold a driver's licence. The jurisdiction in which you vote. It does not matter whether your permanent home is a house, an apartment, or a furnished room. It also does not matter whether you rent or own it. It is important, however, that your home is available at all times, continuously, and not solely for short stays.

Canadians and other foreign visitors should pro-actively complete and file a new 8840 form each year with the U.S. Internal Revenue Service. This is a positive acknowledgment that you are entering the U.S. each year as a "temporary visitor for pleasure" and are complying with U.S. tax laws. A photocopy of each year's completed form should also be carried, when crossing the border into the U.S. the following year, to indicate that you are entering the U.S. as a temporary visitor from Canada.

A copy of the current year's 8840 form can be downloaded from the U.S. Internal Revenue Service website by Clicking HereW8-BEN – Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding

If you have a bank account with a financial institution in the U.S. that earns interest on deposits, then you should complete IRS form W8-BEN (Certificate of Foreign Status) with your U.S. financial institution to avoid possibly having 30% of any interest earned on your deposits withheld and sent to the IRS.

As Canadian residents are aware, bank interest earned on their accounts (regardless how small) is considered a form of taxable income when completing each year's Canadian income tax return with the Canada Revenue Agency (CRA) – formerly known as Revenue Canada.

Similarly, Canadian banks are required to withhold 30% (the maximum income tax rate) of any bank interest they pay to foreigners on their Canadian bank accounts because non-Canadians rarely receive T5 slips and complete a Canadian income tax return. Non-Canadians must, in turn, complete a Canadian income tax return in order to receive any refund.

In the U.S., a similar situation exists for U.S. banks and credit unions paying interest earned on the accounts of Canadians (foreigners).

IRS form W8-BEN is a withholding tax exemption form that the bank or credit union must keep on file to explain to the U.S. Internal Revenue Service why they did not hold back any bank interest paid to you or conversely did not issue you the U.S. equivalent of a Canadian T5 income tax slip.

Unlike the 8840 form that is sent directly to the IRS each year, the W8-BEN form is kept on file by the financial institution for IRS audit purposes and is valid for up to three years

If you open a U.S account there is no problem as long as you open a non interest bearing checking account, Instead of paying interest these accounts will provide you with various services at no charge. That way there is no need to withhold any tax or to report your account to the IRS.

This is perfectly legal and avoids getting snowbirds like us into the IRS system, which can become problematic.

Your post made me stop and consider my situation: that of a sometime snowbird with no bank accounts in the States and doing no business with US clients, but doing income earning consulting work from my motorhome for Canadian clients.

In my case, if I were a regular snowbird with the other conditions above prevailing for three months each year, (and not making any visits to the US during 2005 other than the snowbird trip) it seems that I would pass the first element of the test but fail the second since I was present for only 135 days (90 + 30 + 15), and hence fail the complete test, and therefore would not have to file the 8840.

Am I reading the test correctly? Is the income earning work from my motorhome for Canadian clients a factor?

This begs the questin, so for how long can I go snowbirding each year (the same number of days each year) if I'm not visiting the US at other times of the year? If I understand the test this suggests that four months is a good round number.

I'm not looking to entrap you, given that these posts just might be monitored , how long do you head to Florida each year? Or is it that you fail the overall exception test for other reasons?

The length of time one can be out of their Province and still retain Medicare benefits depends on the Province. I believe B.C. is 6 months. IOW you must be in B.C. 6 months of the year to retain benefits.

The formula for snowbirds in the U.S. is calculated over the last three years you have been in the U.S. and as I recall that total must not exceed 183 days, otherwise you have to file with the IRS.

In our most recent ground border crossings, the U.S. customs officer scanned our passports, so it would seem closer attention is being paid to visitors' activities.

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Is the income earning work from my motorhome for Canadian clients a factor?

This is beyond my understanding, and should be clarified with a competent adviser.

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how long do you head to Florida each year

Ontario allows retired residents to be out of Province 7 months, so we can remain in FLA the max based on the U.S. requirement formula we're talking about and still have a bit of time left over for other trips.

This is an old post but likely still applicable. So if I understand correctly if you visit Florida year after year as a snowbird you must file this B8840 form??

Also, Ontario residents can stay 7 months in the US each yr? If we were to go to Florida for 6 or 7 months would we still be able to enter the US for multiple weekend trips to the US?

I also read in another of Steve's posts (legal PDF document in Visitors to the US) that as a Canadian you can only be out of country for 153 days per year to receive your govt pensions is this correct?

I searched prior to posting but want to be sure I understand for my parents who would like to go to Florida from November to April but they would also like to make frequent weekend trips to the US during the summer months.

Tom, is it possible to add this string to the library under "Visitors to the USA". It addresses some of the points I was trying to make in a recent string when a UK couple were wanting to cross into Canada to retain visitor status. It effects our stay, with a big IRS hook over our backs if we overstay the 6 month limit.

This is an old post but likely still applicable. So if I understand correctly if you visit Florida year after year as a snowbird you must file this B8840 form??

Also, Ontario residents can stay 7 months in the US each yr? If we were to go to Florida for 6 or 7 months would we still be able to enter the US for multiple weekend trips to the US?

I believe you are limited to 182 days out of province (6 months) in order to preserve your Medicare status. It can vary by province but I think most are now at 182 days. We arrange to stay about 155 days on our winter sojourn (Nov to April). That leaves us room for those summer visitations. Be sure you have sufficient emergency medical insurance for that long period. For example, 1/2 day in emergency, treatment etc, cost my insurance company over 21000$ last winter. (I had a 1000$ deductible).

You may also be limited by the visa you are issued by US Immigration service. You are not required to have a 'paper visa' but the B1 visa is 'issued' to you verbally as the officer allows you to enter the USA. It may be limited, plus or minus, to the time period you stated as you entered.

And Yes, after several years, technically, you have to fill out the 8840 form. A mathematical calculation based over 3 years of visits will establish whether or not it is required for you. I do know of some longtime snowbirds who have 'never heard' of the form though.

Remember When you pass the Immigration people, your passport is scanned so they "know where you are" and that applies to both sides of the border should they feel the need. I know Quebec can and do check your absences for Medicare purposes...."should they feel the need".

A good source for information on this is The Canadian Snowbird Association. For the small membership fee of 20$ you have access to all the current info.

Thank you Tom, it may not be fully current, but it does give one a starting point. However, as far as I have been told, the US Laws haven't changed. As for Canadian medical, it is still the case that each province governs alowable time out of province, and they do vary. As I read the NS website, it allows regular out of province of up to 6 months, but periodic times of a year, and a caveat that allows people to do volunteer work out of province, and retain medical coverage for up to 2 years.

I think they count the legs, devide by 4 then multiply by 2. Then if they want to they sick the IRS on you just to make sure. All joking aside, in today's computer age, they can monitor credit card, cell phone, internet usage and even though it is not supposed to happen, I'm sure the Canadian Border Service provides information to the US government. Then, remember since we are in the US as a guest, it is our responsibility to prove we are there legally.

Because we wnter and leave the Country legally we are easier to monitor than illegals. Our passports are scanned every time we enter and leave the Country and information is shared between our govenments.

More important, if and when we (Canadians) sell a piece of real estate in the U.S. there is an automatic witholding of 10% of the selling price for capital gains and the Canadian seller is assigned a Taxpayer Identification Number at the time of the transaction to submit a special IRS return to accompany the witheld amount. In order to reclaim the withheld amount, an 8840 form must be attached.

It is believe U.S. customs officers do spot checks on people reporting they are snowbirds when entering the U.S. and will ask for a copy of their submitted 8840. It's therefore recommended that Canadian snowbirds keep a copy of their 8840 with them when entering the U.S.

The idea is that if a Canadian spends more than 6 months (accoding to the calculation on the 8840) in the U.S. s/he must submit an IRS return on world income. If the person pays income tax in Canada and can demonstrate a closer relationship to Canada and not exceed the six month maximum, they are IRS exempt.

If they wish to stay longer than six months, they must submit an IRS return then claim an adjustment from Revenue Canada for the tax paid in the U.S.

The flip side of the coin is that being out of Canada for longer than six months (depending on the regulations of the Province of residence) the person loses Medical Care coverage.**

You lost me in the second paragraph...They can't make it more complicated...you have to be an attorney to get it right....wow! Now I know one of the reasons they jump the southern border, they can't get the paperwork right. I just imagine asking one of the Mexican workers to prove he has a closer relationship to Mexico and please don't exceed six months stay. I would hate to see him loose his medical coverage there....Jeez! Thanks for the explaination,,,really!

By the way..I was serious about wondering how they could catch you....

FWIW I've read stories in the past that state US and Cdn Customs share information. So US Customs knows exactly when you've gone back to Canada.

One story I found stated that the US Customs guy walked the Canadian over to a desk manned by an IRS employee.

Added the following paragraph and link."Some people have taken comfort over the years from the apparent fact Customs & Border Service was not supposed to share information with the IRS. That balloon was pierced for me this week when talking to a colleague at the annual conference of the Society of Trust and Estate Practitioners (STEP) in Toronto. He told me a first-hand account of a client crossing the border, and the customs officer walking him over to an IRS agent at an adjacent desk, who asked why he had not been filing his required U.S. resident tax return."http://www.winnipegfreepress.com/business/irs-tightens-grip-on-snowbirds--ex-pats-in-canada-96125354.html

Just as an aside when doing the calcs on the 1/3 previous year and 1/6 the previous to that year, if you can stay under 120 days for all three years in the USA you'll be at 180 days for purposes of that calculation.* A bit too close for comfort but you get the idea.

If 110 days you'll be at 165 days for the purposes of that calculation.*

I also totally disagree with the concept of spot checks in this situation. Their computer systems are scanning the bar code on the passport every time you enter the country. It's a very simple computer calculation to pop up a screen stating the person has exceeded their days. So it's not going to be a spot check but every time.

Now the spot check may very well be the checking of the forms. If the US Customs person feels like it well you don't have a choice. If I were US Customs I'd send anyone who looks like they've exceeded their time inside for thorough checking. And not check them for a year. After all what do they care how long a lineup is inside or whether you're delayed. OTOH maybe the IRS guy only works office hours. OTTH (On The Third Hand) maybe the IRS guy decided he needed the overtime and is working the evening or weekend shift.

* I'm not a lawyer, I do not play one on TV and I don't read government regulations or Microsoft End User License Agreements for a living. Make sure you do your own calculations.

Because we wnter and leave the Country legally we are easier to monitor than illegals. Our passports are scanned every time we enter and leave the Country and information is shared between our govenments.

Steve, over the last 35 or so years, I've entered and left the US countless times, as a visitor (business/pleasure), as an inter-company transfer employee, as a resident alien (green card), and as a US citizen. I don't recall ever having to "check out" when I left the US.

Back in the 70's and 80's, the airlines would collect the I-94 form (the one you filled in on the plane or on entry to the US, and which was stamped by the border agent and stapled in your passport) as you departed. This was before the days of scanning passports, and the I-94 forms were sent in bulk to an office near the Mexican border where, one day, the info would be entered into the INS computer.

All this is counter to what folks leaving the UK do; They go through "Passport Control" before leaving the UK at the respective airport.

Are you saying that Canadian visitors/snowbirds submit their passport to US border agents when leaving the US?

Back in the day, the IRS had a requirement that you file a "sailing permit" before leaving the US. I don't recall filing any such permit, since I didn't earn any money here as a visitor.

I'm confused now...what is it about the last 3 yrs? I'm obviously missing something, sorry.

The way I read things is that there's a calculation on the form in the Substantial Presence test section at http://www.irs.gov/pub/irs-pdf/f8840.pdf. It's not just the days spent in the last calendar year. But the days spent this year, 1/3 of the days spent last year and 1/6 of the days spent in the USA the previous year.

Now if you spend more than that calculated number of days in the USA you must fill out the form.

But you will have to read the document yourself. Do *NOT* believe anything I have to say on this topic.